Brisbane has the AFL flag, is winning on house prices next?

From Challenger Chief Economist Dr Jonathan Kearns

Prices for dwellings (houses and apartments) have fallen over the past three months in Melbourne, Canberra, Hobart and Darwin, and barely grown in Sydney. And while price growth has slowed in Brisbane and Perth, it still remains very strong, and has even accelerated in Adelaide. There’s clearly a two-speed housing market, demonstrating that interest rates are not the be all for housing, local factors matter too.

There has been strong growth in Brisbane property prices since the early days of the pandemic. This has seen house and apartment prices in Brisbane pull ahead of those in Melbourne. If current price growth persists, then within a year prices in Perth would also be higher than in Melbourne.

Over the past 40+ years, Melbourne house prices have consistently built a significant premium over Brisbane. Yet, Brisbane prices tend to catch up, though they rarely exceed Melbourne’s. If this trend holds, now might be the time to sell in Brisbane and move to Melbourne.

But as we know in financial markets, past performance does not tell you everything about future performance. Movement in relative prices can be driven by economic developments, not just relative prices. For example, the early 1990s recession was particularly severe down south, resulting in Melbourne prices stagnating relative to those in Brisbane, and this was repeated with the more stringent pandemic lockdowns and economic impact in Melbourne more recently. In contrast, the much stronger economic growth in Brisbane in the early 2000s saw Brisbane house prices surge, catching up to Melbourne. Maybe a Queensland pre-Olympic boom can see Brisbane prices finally surge ahead of those in Melbourne. Time will tell.